2020 is the year when DeFi became cemented in the cryptocurrency space as the ultimate go to term when discussing the advances of blockchain technology.
In simple words, DeFi is the ultimate goal of blockchain in the first place: to enable transacting without the control or ownership by a single entity or company, but governed by a large network of participants who monitor and approve transactions in a decentralized system.
You will see this term popping up a lot in news articles, market analysis and pretty much everywhere these days – DeFi stands for Decentralised Finance. As quoted by Forbes: “it’s the notion that crypto entrepreneurs can recreate traditional financial instruments in a decentralized architecture, outside of companies’ and governments’ control.
While Bitcoin is in fact the original DeFi – the first and most decentralised version of financial instrument, there are now a plethora of altcoins that focus on bringing more innovation in this space. Many of the new cryptocurrencies that emerged in the last three years are even dominating the space and 2020 is seeing these performing much better than older, more established cryptocurrencies.
While privacy coins were a big trend in 2018 and throughout 2019, we are seeing a shift toward DeFi coins in 2020 that will certainly carry on in the following years too. These are great contenders for an investor’s portfolio, so pay attention to them. Most of the DeFi cryptocurrencies have a great score on Token Metrics too, which is even more the reason to take them seriously… as if their market performance wasn’t enough for that already.
The “stablecoin” Dai is a bitcoin-like digital token that aims to be a global currency untouchable by central banks. Unlike bitcoin, its value is pegged to the U.S. dollar, drastically reducing the volatility that prevents bitcoin from being practical for everyday purchases; Compound is a crypto version of a money market fund, letting users earn interest; Aave is a leading lending protocol that leverages a native token LEND to accrue value earned from protocol fees like borrowing and Flash Loans.
DeFi is the realization of the original vision for blockchain technology: a financial ecosystem that does not rely on any centralized entity or company. The focus of DeFi coins is to reconstruct the banking system for the whole world in an open, permissionless way and as such, many cryptocurrencies fall in that category.
The TOP DeFi List:
- Aave (LEND)
- Algorand (ALGO)
- Balancer (BAL)
- Basic Attention Token (BAT)
- Bancor (BNT)
- Chainlink (LINK)
- Compound (COMP)
- COTI (COTI)
- Gnosis (GNO)
- Kyber Network (KNC)
- Loopring (LRC)
- Maker (MKR)
- Melon (MLN)
- Nexus Mutual (NXM)
- Numeraire (NMR)
- Ren Protocol (REN)
- Synthexis (SNX)
- Tezos (XTZ)
- UMA (UMA)
- 0x (ZRX)
- xDai (STAKE)
- and many more that you will find on my Excel Spreadsheet (giveaway)
Being in the domain of Finance, many of the DeFi projects are focused on lending via smart contracts and with crypto-based collateral. Such are the Aave, Atomic Loans, Definer and Swap Rate projects; others focus on Decentralized Exchange Services (such as MCDEX, MerkleX, DDEX, DeversiFi, Nitrogen Network and more) and there’s many other niches that are finding a good use of transparent, blockchain-based utility via smart contracts which is another reason for the booming market for DeFi since the second half of last year.
More and more companies join this space, now even without producing a native cyptocurrency, but rather, bridging the gap between various existing blockchains, providing oracle services and interoperability, which is even more exciting. WBTC – a digital version of Bitcoin but hosted on the Ethereum blockchain is a very promising offering for a faster and more scalable solution for future use of BTC, while the Lightning Network has already been a key DeFi player for the past few years and it’s possible that one day they deliver the much-anticipated multi-layer scalability solution to Bitcoin.
All in all, there’s a lot of development and innovation in the Decentralized Finance niche and it is the fastest growing sector in the crypto space for this year, so it makes perfect sense that from a fundamental analysis, the coins that are involved in this niche, are also experiencing a huge spike in value. Some even topping the Bitcoin performance by more than 300% in the last month (AKRO) – you can find all these details in my excel spreadsheet that I give away at the end of this article.
These are the top 10 DeFi tokens according to CMC, but throughout my research, I noticed that various data aggregators have different coins listed as DeFi. Some have Link, others omit it, some list Tezos and Gnosis, which are absent from other, so all of these inconsistencies prompted me to gather my own list which I compiled in an Excel spreadsheet and I am happy to share it here.
To get my complete notes and records of each of the DeFi tokens and coins, go to this link.